Cecily O'Connor
RedwoodAge.com

If baby boomers could go back in time and change one thing about their retirement planning, more than one-quarter say they'd reconsider their long-term care needs.  

When boomers were younger, many thought "I'm in perfect shape now. I'm sure I'll never need care." Some also thought "I'm sure my kids will take care of me." Or "I'll self-insure."

But by brushing aside long-term care concerns, and the need to buy insurance to pay for it, boomers make themselves vulnerable as they age.

As the average lifespan increases, it's almost inevitable that boomers will need assistance to carry out daily activities such as eating, bathing and dressing. Long-term care provides assistance to adults with chronic illnesses and disabilities, either in a nursing facility or at home. 

The trouble is, many boomers are expecting to receive long-term care coverage through a safety net that has big holes. About 30 percent of baby boomers - more than 20 million people - think they have long-term care coverage, but according to the National Association of Insurance Commissioners, only about 5.2 million Americans are covered.

And even if all those covered were baby boomers, that would only account for only 6.6 percent of the boomer population. This means that one in four boomers incorrectly think they are covered for long-term care expenses, according to research by the America's Health Insurance Plans (AHIP), a trade group representing 1,300 insurers. 

Half of those who said they have long-term care insurance believe Medicare, the federal government's health insurance program for the disabled and those over 65, will pay for the care. They're wrong.

Medicare does cover some home health, skilled nursing and hospice care, but it is not a long-term care program. In fact, the system is under severe financial constraints, with a growing debt that could leave boomers with fewer benefits or shouldering more of the health care burden in the future. Moreover, Medicaid will cover some long-term care services, but only after requiring individuals to spend down nearly all of their assets to qualify for assistance. 

Nursing Home Confusion
In general, it's a challenge for many boomers to understand what long-term care is, how to buy an insurance policy to address care needs and whether they are working with an insurer who represents their best interests.  

Many adults think long-term care is synonymous with going into a nursing home, said Suzanne Schneider, a long-term care insurance agent in Fairfax, Calif. They don't realize long-term care encapsulates much more; it addresses limitations that would make it difficult to live independently in your own home, Schneider said.

Long-term care expenses also throw boomers for a loop. Many assume they can't afford a policy or that they don't need one because they'll be able to rely on their children's financial resources, Schneider said.

As a result, most boomers have not focused on planning for long-term care expenses. Among those nearing or at the age of 60 — when concerns about the potential impact of long-term care on retirement savings grow — only one in four said they are "very familiar" with long-term care insurance, AHIP found.

In addition, 41 percent said they have not had any discussions about long-term care in the past 12 months. Most insurance agents recommend boomers revisit policies annually to make sure they have appropriate coverage in case any of their health or financial circumstances have changed.

A year in a nursing home can cost from $40,000 to $80,000, depending on the area, according to MetLife Mature Market Institute data. The national average daily rate for adult day centers is $61, while the average hourly rate for home health care aides is $19.

Rather than lament these costs, some boomers are wishing they had confronted them earlier. When given the opportunity to instruct a younger version of themselves about which retirement challenges to consider, about 27 percent would advise themselves to better prepare to deal with rising healthcare costs and the possibility of needing long-term care, according to a Lincoln Retirement SM Institute study.

"Most people are wrapped up in their everyday lives, and it often takes a significant life event such as the death of a parent or birth of a grandchild to trigger awareness for the need to set aside time for retirement planning," said Harry Horn, a financial planner with Lincoln.